Legislative Update July 2013

1. Legislative UpdateJuly 2013 Victoria Lincoln Government Relations Advocate victorial@awcnet.org

2. Budget, Budget, Budget • State has been dealing with budget shortfalls since FY 2009 • $2 billion shortfall in the fall of 2011 • 2013 – 2015 biennium (July 1, 2013 – June 30, 2015) • Final enacted operating budget = $33.5 billion • $2.2 billion higher than 2011 - 13 • Nearly $1 billion more for K-12 education • $3.6 billion capital budget Association of Washington Cities

3. AWC Priorities • Ensure fiscal sustainability & flexibility • Restore local liquor revenue & retain other state shared revenues • Preserve current revenue authorities, like B&O, & develop new options • Retain flexibility in lodging tax uses • Foster and invest in infrastructure & economic development • Increase transportation funding & expand revenue options • Authorize tax increment financing & fine-tune other tools • Maintain critical infrastructure programs, like the Public Works Trust Fund, and refrain from diverting capital investment dollars • Enhance service provision • Allow cities flexibility to respond to fiscal challenges, like managing personnel costs • Provide state funding for mandates, like municipal stormwater permits • Curb abusive public records requests Association of Washington Cities

4. State budget –State shared revenues • Permanent diversion of local liquor revenue in 2012 • ESHB 2823 permanently diverts $10 million per year of liquor excise tax from cities and counties to state general fund and freezes profit distributions at 2011 levels. • Attempts to restore local liquor revenue • SB 5703/HB 1368 sought to restore liquor taxes and historic profit growth. (Did not pass) • HB 2067 sought to restore historic profit growth. (Did not pass.) Association of Washington Cities

5. State budget –State shared revenues • Enacted budget cut local share of liquor taxes • Legislators sought 50% reduction this biennium • May have inadvertently cut by 2/3 • AWC seeking resolution • Retains all other shared revenues, including: • Criminal justice assistance funds; city-county assistance account; SST mitigation; & annexation sales tax credit Association of Washington Cities

6. State budget - Infrastructure funding • Capital budget sweeps Public Works Trust Fund • No funding for 2014 Construction Loan List • Swept $277M from the Public Works Assistance Account into the General Fund • HB 2051 redirects 67% of the Real Estate Excise Tax, 100% of the Public Utility Tax, and 100% of the Solid Waste Tax revenues from the PWAA to the Education Legacy Account through FY 2019 • Leaves only a portion of REET revenues and loan repayments to fund construction loans over the next six years. Association of Washington Cities

7. State budget - Infrastructure funding • Stormwater • $100 million ($81 million in competitive grants, up to $15 million can be used for grants for project planning and design) • Development of an ongoing comprehensive, statewide stormwater financial assistance program to be implemented beginning no later than July 1, 2015 • $1.98M for Low Impact Development Training program Association of Washington Cities

8. State budget – Transportation • No transportation revenue package • Special session in November? Association of Washington Cities

9. Telecommunications taxes • Part of state budget deal, HB 1971: • Removes sales tax exemption for all residential phone lines – expected to generate $5M in local sales taxes per year • Fixes issues raised in Sprint Spectrum case – may have required local governments to refund an estimated $249.5M in sales tax refunds Association of Washington Cities

10. Lodging tax • HB 1253 maintains most uses of local lodging taxes set to expire on July 1, 2013 • May continue to fund the operations of special events and festivals (as opposed to just “marketing”) • May continue to fund the operations of tourism-related facilities owned by non-profits. • May not fund the capital expenditures of tourism-related facilities owned by non-profits • New application/funding process in municipalities over 5,000 • Applications submitted to LTAC for recommendations • New reporting requirements for applicants & recipients • Fact sheet available on AWC’s website: www.awcnet.org Association of Washington Cities

11. Other city finance bills • Passed Legislature • SB 5110 – Authorizes local governments to contract for purchase of supplies, materials, or equipment to the lowest bidder before sales and business and occupation taxes imposed by any local government are applied • Did not pass • SB 5656 – Mandating city use of the state’s business license system • SB 5688 – Requiring uniformity in state and city B&O tax classifications • SB 5697 – Reducing the frequency of local sales tax changes • HB 1287 – Tribal property tax exemption • HB 1828 - Local Government Fiscal Health Commission Association of Washington Cities

12. 2014 session preview • State budget woes will continue • The legislature must show “real and measurable progress” towards compliance with the McClearydecision by 2018 • Estimated total cost of $9 billion through state FY 2019 • Only provided $1 billion this biennium • Can local liquor revenue & the Public Works Trust Fund be restored? • Continued discussions about city business licenses & taxes Association of Washington Cities

13. Questions Victoria Lincoln victorial@awcnet.org Association of Washington Cities 360-753-4137 www.awcnet.org Association of Washington Cities